Shares in Norway’s Algeta has gone through the roof this morning after it announced a deal with Bayer to develop and sell its investigational prostate cancer treatment Alpharadin.

Under the terms of the agreement, the two companies will jointly develop Alpharadin, which is currently being evaluated in a Phase III trial for the treatment of bone metastases in symptomatic hormone-refractory prostate cancer patients. The German firm will contribute “a substantial majority of the costs of future development”, Algeta said, noting that Bayer will commercialise Alpharadin globally and the Oslo-headquartered company will have the option to co-promote the treatment in the USA under a profit-sharing arrangement.

Cashwise, Bayer is making an upfront payment of 42.5 million euros and Algeta will receive cash payments upon achievement of certain development, manufacturing and commercialisation milestones, totalling up to 560 million euros, plus tiered double-digit royalties on net sales.

Alpharadin is the first in a new class of “alpha-pharmaceuticals” and is based on radium-223. It is administered as a simple injection and has “a unique mode of action”, Algeta says, whereby it targets bone metastases specifically and “exerts a highly localised effect on tumour cells while minimising damage to normal surrounding tissues”. In Phase II studies, Alpharadin demonstrated “strong evidence that it can prolong patient survival, improve quality of life and offer a benign safety profile”, the firm added.

Andrew Kay, Algeta chief executive, said the deal “is the culmination of an extensive process to establish and deliver the best possible commercialisation strategy for alpharadin”. In Bayer, “we have selected a world-class oncology company with a proven global track record of launching major cancer products”, he added.

Kemal Malik, head of global development at Bayer HealthCare, said the data the company has seen “suggest that Alpharadin represents a highly targeted treatment option with convenient handling and manageable side effects”. Algeta shareholders are certainly excited and the company’s stock price was up 61% to 65 Norwegian crowns at 11.45 UK time.